Tennessee Comptrollers have sized up a proposal for government-owned internet in Newport, and they didn’t like what they saw, a document to city officials says.
In their report, Comptrollers said the plan doesn’t appear as if it’s feasible and that it too easily assumes a city-owned broadband network would fetch a certain number of subscribers from AT&T and other private providers.
City officials have said much of the plan’s success depends on what Comptrollers make of their written report. Now, those same city officials aren’t talking.
As reported, David Williams, president of the Washington, D.C.-based Taxpayers Protection Alliance, said the plan is unworkable.
“It turns out the Comptrollers have many of the same concerns we have,” Williams said.
If the plan goes through, city officials would offer broadband through the public Newport Utilities. As reported, private providers already offer internet in Newport, meaning a government-owned service would compete against private providers in that city.
NU also services areas outside Newport, including Del Rio and Parrottsville. Newport officials say those areas — unlike Newport — can’t get broadband through private providers.
NU officials assume their municipal broadband service by 2021 can get 45 percent of the customers in their service area, a figure called an uptake rate. City officials can only have a reasonable rate of success if they get such a percentage, but that’s not likely, Comptrollers say.
“The plan’s uptake rate assumption of 45 percent is based largely upon the ability to attract current subscribers from other providers; however, the plan does not address the impact of market competition on pricing,” Comptrollers wrote.
“The plan did not provide adequate assumptions, or a methodology, to support a 45 percent uptake rate given the number of existing service providers in the service area.”
In their proposal, city officials say 22 percent of homes and 12 percent of businesses in the service area don’t have broadband because it’s either unavailable or, if available, too expensive. But the remaining 78 percent of homes and 87 percent of businesses already have access to providers, Comptrollers added.
“Because the plan did not consider the impact of market competition to the population of customers that currently have service, we could not conclude the reasonableness of the uptake rate and therefore could not determine if the plan is feasible,” Comptrollers wrote.
Nip it in the bud
Williams said city officials will have a hard time achieving a 45 percent uptake rate.
“It’s not going to happen. That is a fantasy number, and Comptrollers kind of admitted it in their report,” Williams said.
Williams said the people in NU’s service area who supposedly don’t have broadband access can still get it through a satellite service.
Tennessee Watchdog made repeated attempts to interview Newport officials, including Mayor Connie Ball, all members of the City Council, and NU General Manager Glenn Ray. None returned messages seeking comment.
In an online letter to NU subscribers earlier this month, Ray said members of the Tennessee Valley Authority, in addition to Comptrollers, were reviewing the city’s proposal.
“If either of these organizations were not assured the success of our plan we would not be proceeding towards the next steps to obtain funding, start final designs and begin installations,” Ray wrote.
In the same letter, Ray said Williams’ earlier claims were preposterous and that “no taxpayer money is needed for the plan’s success.”
“I encourage you to not waste your time or emotions reading or listening to the misinformation from these watchdog organizations,” Ray said in his letter.
Ray also mentioned getting a threatening phone message and a letter in the mail from Lexington, Kentucky, that seemed to imply it came from Williams’ organization — although he would not elaborate.
Williams said he knows nothing of the message, and he and members of his organization disavow it.
The Newport Plain Talk says NU’s board of directors approved a funding strategy for the project in January. Board members approved a request for interior financing the next month.
As reported, if the project goes through it will cost $21.9 million.
City officials have hired a Colorado-based consulting firm, Magellan Advisors, to advise them. The firm has a reported history of telling bureaucrats whatever they want to hear.
Williams said similar projects have failed repeatedly around the country, and when things go south people in those cities consequently pay higher bond ratings, and the local economies suffer. As reported, Memphis and Provo, Utah, have had problems with municipal broadband.
Williams said he fears Newport officials will simply ignore Comptrollers’ advice.
“The contingency plan is to ignore the facts. We’ve seen it time and time again. We can make the best case not to do this, and they’ll ignore it. And they’ll go ahead and build these networks. Five, 10, 15 years down the road, the thing may go belly-up and they’ll have to sell it,” Williams said.
“I would say that Newport may not look like a big deal for us to be involved in, but we are trying to nip these things in the bud when we can. We’ve seen these things fail time and time again, and we’re trying to stop it from happening in Newport. We’re trying to warn people of what is coming their way.”
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